& cplSiteName &

Comcast-TWC Deal: Playing All the Numbers

Alan Breznick
2/14/2014
50%
50%

Unlike the big cable mergers of the past, Comcast is buying Time Warner Cable for more than TWC's cache of video subscribers. A lot more.

Although much of the early coverage of the proposed $45.2 billion deal has focused on the 11.2 million video subscribers that Time Warner Cable Inc. (NYSE: TWC) would add to Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s already market-leading stash of 21.7 million basic cable customers, that's far from the whole story.

That's because the North American cable business is now about non-video services at least as much, if not more than, it's about the traditional video services. (See Comcast's TWC Coup: 3 Things to Know.)

So let's play the numbers game here by looking at some other key numbers driving this deal, not just the usual video numbers. Then it will become clear just how dominant a force the planned Comcast-TWC combo could be.

Broadband subscribers
With an impressive total of 20.7 million high-speed data customers today, Comcast already leads the US cable broadband market by a wide margin. In fact, like most major North American MSOs, it now has nearly as many broadband customers as video customers. Throw in TW Cable's 11.1 million broadband subscribers and you've got a grand total of nearly 32 million high-speed data users, nearly as many as the 33 million video customers that the new company would inherit.

While Comcast executives have solemnly vowed to sell off 3 million video customers to cap the combined company's size at 30 million (or 30% of the US pay-TV homes) to ease federal antitrust concerns, they've said nothing about divesting any broadband subscribers. That's even though the combined company would control close to 40% of the US cable broadband market, well above the MSO's self-imposed 30% limit on the video end.

To be sure, most cable video subscribers are also cable broadband subscribers these days and vice versa. So it would be tough to divest one without the other. But, even if it sold off 3 million broadband homes, Comcast would still have a commanding broadband presence nationally.

Voice subscribers
Voice services don't get much attention (or respect) for cable operators anymore for some reason. But they are still huge, growing revenue generators for the industry, trailing only video and broadband. So they count for a lot in this deal as well.

With nearly 10 million VoIP customers, Comcast is already the fourth-biggest wireline phone company in the US. Toss in TW Cable's 4.8 million phone customers and you're talking about a total of almost 15 million subscribers, which is a formidable total.

Major metro markets
Similarly, Comcast already boasts cable operations in 20 of the 25 biggest metro areas across the US, including nearly every major market on the East Coast and many of those on the West Coast. But the two big markets that it doesn't dominate right now are the two largest in the country -- New York City and Los Angeles. Guess which ones TWC controls?

Besides the nation's two biggest cities, TW Cable would also bring Columbus, Cincinnati, Cleveland, Charlotte, Kansas City, Dallas, San Antonio, and part of San Diego into the Comcast fold, at least before the planned divestiture. So, with just a handful of exceptions like St. Louis (Charter Communications Inc. , New Orleans (Cox Communications Inc. ), and Tampa (Bright House Networks ), every NFL city would be a Comcast city.

The Proposed Comcast-TWC Goliath
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.

Business services revenues
Here's the pièce de résistance for Comcast in this deal. With business (enterprise/wholesale) services now the fourth-biggest revenue generator for major US MSOs, Comcast has become king of this category during the past three years. The MSO racked up a total of $3.2 billion in business revenues last year, up more than 26% from nearly $2.6 billion in 2012. (See Comcast Makes Middle Market Gains.)

TWC has been no slouch in this area either, though. It took in $2.3 billion in 2013, up 21% from nearly $1.9 billion the year before. So the combined company would instantly generate $5.5 billion in business services revenues, at least before divestiture. (See TWC: Charter's Got Nothing on Us.)

Even more importantly, perhaps, TWC would grant Comcast access to the New York City and Los Angeles commercial markets, the two biggest in the country. With control of those two markets and a true national presence for the first time, the combined company could not only sign up more small and midsize firms in those markets, but break into the large enterprise sector as well. That prospect should have AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) somewhat concerned.

Indeed, on the joint Comcast-TWC conference call with the press Thursday morning, Comcast Chairman and CEO Brian Roberts made a note of the enhanced competitive capabilities of the merged firm. He said the new Comcast would be better able to compete with other national and international companies for larger customers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(14)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
swattz101
50%
50%
swattz101,
User Rank: Light Beer
2/20/2014 | 12:01:09 PM
Re: M&A
I believe Comcast does have some small pockets in Arizona, but Cox is the big providor, at least in Tucson and Phoenix. I found this map, I don't know how acurate and probably a little dated, but gives a picture of some of the coverage areas out there.

http://tvbythenumbers.zap2it.com/2011/01/12/picture-1000-words-us-cable-provider-map/78308/
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/19/2014 | 9:23:53 AM
Re: New York
It might be, true. I'm not entirely sure the plan all along wasn't to sell the second Glenn Britt left. DOCSIS 3.0 upgrades don't cost all that much, and you would think it would be something the company would want to invest in. But here we are in 2014 and only Los Angeles, NY and Kansas City (because of Google Fiber) are seeing any attention.

I do think the deal will pass. While I think the concerns about scale, leverage and dominance have merit (especially the use of content licensing deals and usage caps to hinder Internet video), it will be hard to prove them cleanly enough to be effective. I also bet Comcast has some theatrical conditions ready to go to make the deal sound more compelling than it is.
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/19/2014 | 1:53:16 AM
Re: M&A
Ok, well its a little hard to read the fine print, it says something about DOCSIS serving areas, but I'm almost 100% sure they serve Hawaii and the coverage is most of the state, I also thought they were also in Arizona and Colorado but I'm less sure about what types of services and how much of coverage thoses states get.  Same with Kansas, I know they are in Kansas City (which is not in Kansas) which is shown.

It's a minor detail, since in the end they are targeting about 30% which means they'll need to divest some of their current areas.  The big question is which ones and to who?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:48:15 PM
Re: M&A
Tell us more about what's missing in the map, Mark. What did you spot?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:45:56 PM
Re: New York
Yep. Sounds about right. I wonder if New Yorkers will get any better service from Comcast, tho. The diference might be so marginal as to go unnoticed. It's still sad to see how much TWC has gone downhill. 
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/17/2014 | 3:01:17 AM
Re: M&A
Yup, Cable Co's don't compete directly with each other, so I'm sure that will come up in the DoJ and FCC debates.  However, I am interested to see what areas get given up and to whom.  In my view, Comcast is a much more agile competitor.  But TWC and Comcast already had a joint tech doc for moving forward with IP services so maybe it really doesn't matter anyway.

That graphic is off.  It's missing at least one TWC area.  Or is that the proposed company and the rest will be sold off?
MikeP688
50%
50%
MikeP688,
User Rank: Light Sabre
2/15/2014 | 7:56:07 PM
Re: New York & Other Brief Thoughts
It is a bold move by Comcast--no question.     The smaller players (Cox/Charter et. al) will have their work cut out for them in terms of trying to stay relevant.   Another affirmation of what Alan noted is reflected in this chart from our friends @ Business Insider.  I did almost fell out of my chair in laughter at the claims by the folks @ Comast.   Beyond this , though,   I would humbly suggest though that the other part of the puzzle is control of content as Comcast continues to make inroads with its' ownership of NBC Universal.     Beyond the reach as discussed in the discourse here, it is content that matters--and I suggest that ultimately it is content that is crucial.    It is by no means certain that regulators will approve this right now....

May we truly live in interesting times. :-)

 

 
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/14/2014 | 7:24:07 PM
Re: New York
Time Warner Cable always took a "targeted" approach to DOCSIS 3.0 upgrades, whereas Comcast simply decided to get out ahead of the demand, largely because Comcast saw more FiOS competition in many markets. Comcast at least invests something back into the market. Time Warner Cable tells YOU what you want and if it doesn't meet their beliefs, too bad. Time Warner Cable is also behind Comcast in terms of set top boxes, GUIs, and feature set.

Both perform horribly in customer satisfaction rankings, but I do think Comcast is the better of two "evils." 
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:07:50 PM
Re: New York
So how much better do you think Comcast can do in NYC than TWC? How badly has Time Warner underperformed there?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:05:59 PM
Re: Running the numbers
Interesting idea. So, if I understand correctly what you're suggesting, you're looking for the cost of the deal broken down by those various metrics?  
Page 1 / 2   >   >>
More Blogs from Breznick Unbound
In a sign that Google Fiber has all but abandoned ship even in its existing markets, the Alphabet unit reports notably slower video subscriber growth in the second half of 2016.
Despite strong sales of 4k-ready TV sets, the emergence of UHD content and some progress on technical standards, several obstacles remain for the UHD transition.
Whether it's the new DOCSIS 3.1 spec or the forthcoming Full Duplex DOCSIS spec, cablecos are still mainly counting on DOCSIS to rule the broadband space.
Google unit spells out plans to launch its own OTT skinny bundle service for $35 a month but will face stiff competition in an increasingly crowded market.
Two Wall Street analysts have now concluded that Verizon stands to gain much more from marrying Charter than vice versa.
From The Founder
Either we perform a complete 'factory reset' on the way the telecom industry creates and deploys virtualization, or we face the consequences.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
Infinera Introduces Instant Network

4|20|17   |     |   (1) comment


Mike Capuano, vice president of marketing at Infinera, discusses the advancement from Instant Bandwidth to new Instant Network capabilities, which include Bandwidth License Pools, Moveable Licenses and Automated Capacity Engineering (ACE).
Women in Comms Introduction Videos
Vodafone's Eubank on Sponsors, Mentors & Moving On Up

4|19|17   |   4:25   |   (0) comments


Vodafone America's Head of Operations Kimberly Eubank breaks down the difference between a sponsor and a mentor and shares why both made a big difference in her career.
LRTV Custom TV
NYC Auto Show: Are We Smart Yet?

4|18|17   |     |   (0) comments


The auto industry is facing some big transformations as electric vehicles, autonomous technology and connected cars are seen as the future of the industry. During the much-anticipated NY international auto show, there was an emergence of new technology and mobility service on the show floor. Aside from performance, brands like Lincoln, Hyundai, Honda, Mercedes and ...
LRTV Huawei Video Resource Center
The Impact of Video

4|18|17   |     |   (0) comments


David Mercer from Strategy Analytics discusses the impact of video on current strategies.
LRTV Custom TV
Pardeep Kohli Discusses Network Transformation & the Market Opportunity for the 'New' Mavenir Systems

4|13|17   |     |   (0) comments


In a brief discussion at MWC 2017, Heavy Reading analyst Adi Kishore talks to Pardeep Kohli, CEO, Mavenir Systems about the creation of the 'new Mavenir' and some of the key challenges facing operators in today's market. A key theme of the discussion centers around operator need for software-only, virtualized solutions and how they will need to adapt to ...
Women in Comms Introduction Videos
Tech Maverick Shares Her Tips for Gender Inclusivity

4|12|17   |   7:28   |   (0) comments


Wendy Hall Bohling, a corporate escapee, author and gender exclusivity consultant, tells her story of sexism, bias and progress along the road to gender equality in the workforce.
LRTV Huawei Video Resource Center
Huawei at MWC 2017

4|11|17   |     |   (0) comments


At Mobile World Congress 2017, the biggest mobile industry gathering of the year, Huawei showcased its new innovations and solutions with the theme "Open Road," which focuses on cloud, 5G, operation transformation, videos and consumer-oriented products. Its campaign has been recognized by three awards given by GSMA.
LRTV Custom TV
China Telecom NFV Infrastructure on RSD

4|6|17   |     |   (0) comments


Lynn Comp, senior director of market development of Intel, is joined by Chong Zhang, storage engineer at Inspur and Ou Li Yan, architect for technology strategies of China Telecom on what NFV brings.
LRTV Custom TV
Nokia's IMPACT Software Demo

4|6|17   |     |   (0) comments


Khamis Abulgubein of IoT market development at Nokia demonstrates IMPACT (intelligent management platform for all connected things), a software solution with a horizontal approach to managing any device on any application.
LRTV Custom TV
Nokia Introduces Virtual Service Router for More Rapid Service

4|6|17   |     |   (0) comments


James Cumming, product line manager for virtualized service routers at Nokia, demonstrates how the virtual router based off the Nokia ecosystem changes the network function experience.
LRTV Custom TV
The Keys to SD-WAN Success

4|6|17   |     |   (0) comments


Versa Networks CEO Kelly Ahuja talks about the key requirements for service provider-managed SD-WANs.
LRTV Custom TV
Intel & Cisco on Joint 5G Solutions

4|5|17   |     |   (0) comments


Dave Ward, SVP and CTO of Cisco, is joined by Sandra Rivera, corporate VP and general manager of network platforms group of Intel, on the revolutionary 5G technology that changes networking and computing fundamentally.
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Brazos Hall - Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Time for a Telecom Reboot
Steve Saunders, CEO and founder, Light Reading, 4/19/2017
Comcast Ready for Clash With Hulu
Mari Silbey, Senior Editor, Cable/Video, 4/18/2017
Unlicensed: It's What's Next for US Mobile Operators
Dan Jones, Mobile Editor, 4/19/2017
Verizon's Fiber Spend Won't End With Corning
Mari Silbey, Senior Editor, Cable/Video, 4/19/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
Animals with Phones
Now That's an Ad Campaign Click Here
Meerkats to the rescue!
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.